NXP Semiconductors. Investor Presentation February 2016

Transcription

1 NXP Semiconductors Investor Presentation February 2016

2 Forward Looking Statement This document includes forward-looking statements which include statements regarding our business strategy, financial condition, results of operations, and market data, as well as any other statements which are not historical facts. By their nature, forward- looking statements are subject to numerous factors, risks and uncertainties that could cause actual outcomes and results to be materially different from those projected. These factors, risks and uncertainties include the following: market demand and semiconductor industry conditions, our ability to successfully introduce new technologies and products, the demand for the goods into which our products are incorporated, our ability to generate sufficient cash, raise sufficient capital or refinance our debt at or before maturity to meet both our debt service and research and development and capital investment requirements, our ability to accurately estimate demand and match our production capacity accordingly or obtain supplies from third-party producers, our access to production from third-party outsourcing partners, and any events that might affect their business or our relationship with them, our ability to secure adequate and timely supply of equipment and materials from suppliers, our ability to avoid operational problems and product defects and, if such issues were to arise, to rectify them quickly, our ability to form strategic partnerships and joint ventures and successfully cooperate with our alliance partners, our ability to win competitive bid selection processes to develop products for use in our customers equipment and products, our ability to successfully establish a brand identity, our ability to successfully hire and retain key management and senior product architects; and, our ability to maintain good relationships with our suppliers. In addition, this document contains information concerning the semiconductor industry and our business segments generally, which is forward-looking in nature and is based on a variety of assumptions regarding the ways in which the semiconductor industry, our market segments and product areas will develop. We have based these assumptions on information currently available to us, if any one or more of these assumptions turn out to be incorrect, actual market results may differ from those predicted. While we do not know what impact any such differences may have on our business, if there are such differences, our future results of operations and financial condition, and the market price of the notes, could be materially adversely affected. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak to results only as of the date the statements were made; and, except for any ongoing obligation to disclose material information as required by the United States federal securities laws, we do not have any intention or obligation to publicly update or revise any forward-looking statements after we distribute this document, whether to reflect any future events or circumstances or otherwise. For a discussion of potential risks and uncertainties, please refer to the risk factors listed in our SEC filings. Copies of our filings are available from our Investor Relations department or from the SEC website, 2

3 Focused on Profitable Growth from Smarter World Opportunity Our innovative solutions are used in a wide range of applications Connected Car Security Portable and Wearable Internet of Things Car entertainment In-vehicle networking Secure car access Secure V2X communication Radar Mobile transactions E-Government Smart bank cards User authentication Embedded security Mobile audio High-speed interfaces Gaming Personal health & fitness Healthcare Smart home and buildings Smart cities - smart grid M2M Industry 4.0 Intelligent logistics 3

4 We Provide Secure Connections for a Smarter World Enhanced security Mesh connectivity Sensors Smart LED lighting Gateway & cyber security Access Car entertainment In-vehicle networking Car access V2X and Radar Secure bank cards Mobile transactions Loyalty- reward RFID tags - labels Supply chain monitoring NFC readers e-passport Smart eid Health card Contactless transit cards Access solutions Micro-payments 4

5 NXP Value Proposition Multiple High Growth Markets + RMS of at Least 1.5x Profitable Growth Operational Excellence + Benchmark Cost Structure Strong Cash Generation Industry Leading Management Team and People Customer-Focused Passion to WIN MAXIMIZE SHAREHOLDER VALUE 5

6 Growth Driven by High RMS Businesses and Adjacent Markets Revenue $6,000 $4,000 High RMS Business Core Business $2,000 $ Adjacencies Focused on High growth markets; Deliver unique NXP capabilities; Driving operating margin; Optimized capital structure. Broad sustainable leadership as we Invest in Core & High RMS business ; Thought leadership in Adjacent markets; NXP positioned to outperform peers. 6 Note: 1. GM, EBIT, EPS, Interest Expense, Free Cash Flow(FCF), Leverage, Adj. EBITDA are all non-gaap figures 2. Based on normalized NXP revenue growth, versus normalized, aggregate HPMS Peer revenue

7 Driving Profitable Growth in Excess of Addressable Market Revenue Up 12% 3-yr. CAGR ($B) 1 EBIT 1 Profit up 19% 3-yr. CAGR ($B) $4.4 $4.8 $5.6 $ $0.8 $1.1 $1.4 $ EPS 1 up 44% 3-yr. CAGR Free Cash Flow up 28% 3-yr. CAGR ($B) 1 $1.88 $3.29 $4.76 $ $0.5 $0.7 $1.1 $ Note: 1. GM, EBIT, EPS, Interest Expense, Free Cash Flow(FCF), Leverage, Adj. EBITDA are all non-gaap figures, 3-yr. CAGR reflect the period

8 Focused on Generating Cash Cash Interest Expense Declined 14% 3-yr. CAGR ($M) 1 Leverage $266 $179 $139 $ x 1.9x 1.7x 3.9x Interest Coverage 1 Net Debt ($B) 3.1x 6.3x 10.2x 9.8x $2.9 $2.7 $2.8 $ Note: 1. GM, EBIT, EPS, Interest Expense, Free Cash Flow(FCF), Leverage, Adj. EBITDA, Interest Coverage, are all non-gaap figures, 3-yr. CAGR reflect the period

9 Recent Quarterly Business Trends Revenue ($M) Non-GAAP Gross Margin 1,246 1,349 1,515 1,537 1,467 1,506 1,522 1,606 Q1 14 Q2 14 Q Q1 15 Q2 15 Q % 48.6% 47.9% 46.6% 48.5% 48.7% 49.1% 50.2% Q1 14 Q2 14 Q Q1 15 Q2 15 Q Non-GAAP Operating Margin Adj. EBITDA Margin 24.2% 24.8% 25.7% 25.3% 26.2% 27.8% 29.5% 27.0% Q1 14 Q2 14 Q Q1 15 Q2 15 Q % 29.0% 29.8% 29.3% 30.5% 32.0% 33.8% 32.1% Q1 14 Q2 14 Q Q1 15 Q2 15 Q

10 Business Segment Revenue and Non-GAAP Margin Trends HPMS Segment Standard Product Segment 56.0% 55.4% 53.3% 51.1% 54.3% 53.7% 54.0% 54.6% 33.2% 33.2% 33.6% 34.1% 35.0% 35.1% 35.4% 35.8% ,139 1,169 1,104 1,146 1,164 1,306 Q1 14 Q2 14 Q Q1 15 Q2 15 Q HPMS Revenue($M) Non-GAAP HPMS Gross Margin Q1 14 Q2 14 Q Q1 15 Q2 15 Q STDP Revenue($M) Non-GAAP STDP Gross Margin 27.3% 27.8% 28.4% 27.5% 28.9% 30.3% 31.9% 29.2% Q1 14 Q2 14 Q Q1 15 Q2 15 Q Non-GAAP HPMS Operating Income($M) Non-GAAP HPMS Operating Margin 18.0% 19.9% 20.7% 20.8% 22.9% 23.3% 24.6% 23.6% Q1 14 Q2 14 Q Q1 15 Q2 15 Q Non-GAAP STDP Operating Income($M) Non-GAAP STDP Operating Margin 10 10

11 HPMS Segment Revenue Business Trends($M) (1) Secure Identification Solutions Automotive 37% Q-Q 45% Y-Y (16%) Q-Q 1% Y-Y Q1 14 Q2 14 Q Q1 15 Q2 15 Q Q1 14 Q2 14 Q Q1 15 Q2 15 Q Secure Connected Devices 20% Q-Q 9% Y-Y Secure Interface & Infrastructure 4% Q-Q (8%) Y-Y Q1 14 Q2 14 Q Q1 15 Q2 15 Q Q1 14 Q2 14 Q Q1 15 Q2 15 Q Note: 1. As a result of the FSL Merger, NXP has included previously reported Freescale Semiconductor ( Freescale ) product group revenue into its various existing High Performance Mixed Signal (HPMS) and Standard Products (STDP) segments. As of the fourth quarter, the NXP HPMS operating segments include the following (1) Automotive includes revenue from Freescale s Automotive MCU and Analog & Sensor product groups; (2) Secure Connected Devices includes revenue from Freescale s Microcontroller product group; (3) Secure Interface & Infrastructure, previously known as Secure Interface & Power includes revenue from Freescale s Digital Networking and RF product groups. Additionally, certain portions of Freescale s Analog & Sensor product group and Other revenue is apportioned to various NXP operating segments consistent with NXPs prior product and revenue classification approach, this included product-functionality alignment as well intellectual property (IP) sales and licensing revenue. 11

12 Quarterly Revenue and Operating Income GAAP Financial Summary Quarterly Segment Revenue ($M): ($ in millions) Q Q-Q Product Revenue 1,577 1,489 1, All Other (4) (8) Total Revenue 1,606 1,522 1, Gross Profit (121) (85) Percent of total revenue 38.5% 48.6% 45.8% (10.1pts) (7.3pts) Operating income 1, Percent of total revenue 63.1% 24.6% 20.2% 38.5pts 42.9pts Y-Y STDP $271 17% Corporate and Other $29 2% HPMS $1,306 81% Non-GAAP Financial Summary Quarterly Product Revenue (% of Product Revenue): ($ in millions) Q Q-Q Gross Profit Y-Y STDP $271 17% SIS $225 14% Percent of total revenue 50.2% 49.1% 46.6% 1.1pts 3.6pts Operating income (16) 44 Percent of total revenue 27.0% 29.5% 25.3% (2.5pts) 1.7pts SI&I $280 18% SCD $379 24% AUTO $422 27% 12 12

13 Business Segment Performance GAAP Financial Summary HPMS ($ in millions) Q Q-Q Y-Y STDP ($ in millions) Q Q-Q Y-Y Revenue 1,306 1,164 1, Gross Profit (92) (61) Gross Margin 40.9% 53.8% 50.9% (12.9pts) (10.0pts) Revenue (54) (60) Gross Profit (18) (13) Gross Margin 33.2% 33.2% 31.1% - 2.1pts Operating income Operating income Operating Margin 76.2% 28.4% 23.7% 47.8pts 52.5pts Operating Margin 38.0% 17.2% 12.4% 20.8pts 25.6pts Non-GAAP Financial Summary HPMS ($ in millions) Q Q-Q Y-Y STDP ($ in millions) Q Q-Q Y-Y Gross Profit Gross Margin 54.6% 54.0% 51.1% 0.6pts 3.5pts Gross Profit (18) (16) Gross Margin 35.8% 35.4% 34.1% 0.4pts 1.7pts Operating income Operating income (16) (5) Operating Margin 29.2% 31.9% 27.5% (2.7pts) 1.7pts Operating Margin 23.6% 24.6% 20.8% (1.0pts) 2.8pts 13 13

14 1 4 Debt Summary Debt Instrument Sr. Unsecured Notes Term Loan E Sr. Unsecured Notes Cash Convertible Notes Term Loan D Sr. Unsecured Notes Term Loan B Sr. Unsecured Notes Sr. Secured Notes Sr. Secured Notes Sr. Unsecured Notes Sr. Unsecured Notes Issue Date 24-Sep Mar May Dec Dec Jun Nov Feb May Nov Jun Mar Dec-15 Book Value (M) $ 499 $ 390 $ 746 $ 972 $ 386 $ 594 $ 2,659 $ 497 $ 519 $ 1,022 $ 396 $ 496 $ - Nominal Amount (M) $ 500 $ 392 $ 750 $ 1,150 $ 391 $ 600 $ 2,700 $ 500 $ 500 $ 960 $ 400 $ 500 $ - Coupon 3.50% Libor Libor Libor Libor 3.75% 1.00% 4.125% 5.75% 5.00% 6.00% 4.625% 5.75% bps bps bps bps Floor NA 75 bps NA NA 75 bps NA 75 bps NA NA NA NA NA Rating Moody's Ba2 Baa3 Ba2 Ba2 Baa3 Ba2 Baa3 Ba2 Baa3 Baa3 Ba2 Ba2 Standard & Poor's BB+ BBB- BB+ BB+ BBB- BB+ BBB- BB+ BBB- BBB- BB+ BB+ BBB Revolving Credit Facility Total Leverage Total Debt ($M) $ 9,212 Total Cash ($M) $ 1,614 Net Debt ($M) $ 7,598 TTM Adj. EBITDA $ 1,958 Cost of Debt 3.91% $2,700 63% 37% $400 Float Fixed $500 $392 $750 $1,150 $600 $391 $500 $500 $960 $ % '16 Sr. Unsecured Note (3.5%) Term Loan E (2.75%) '18 Sr. Unsecured Note (3.75%) Cash Convertible Note (1%) 63% Term Loan D (3.25%) '20 Sr Unsecured Note (4.125%) Term Loan B (3.75%) '21 Sr. Unsecured Note (5.75%) '21 Sr. Unsecured Note (5.00%) '22 Sr. Unsecured Note (6.00%) '22 Sr Unsecured Note (4.625%) '23 Sr. Unsecured Note (5.75%) Secured Unsecured 14

15 Working Capital Ratios (1) DSO DPO Q1 14 Q2 14 Q Q1 15 Q2 15 Q DIO (2) Q1 14 Q2 14 Q Q1 15 Q2 15 Q Cash Conversion Cycle Q1 14 Q2 14 Q Q1 15 Q2 15 Q Q1 14 Q2 14 Q Q1 15 Q2 15 Q DSO = (91.25 x AR) / Revenue DPO = (91.25 x AP) / GAAP COGS Note: Working capital ratios exclude the purchase price accounting amortization effects on GAAP COGS and Inventory due to the FSL merger, including inventory step up and amortization of acquired PP&E 2. DIO calculation for 3Q15 includes $66M of inventory classified as Assets held for sale DIO = (91.25 x Inventory) / GAAP COGS Cash Conversion Cycle = DIO +DSO - DPO 15

16 Guidance for the First Quarter of 2016 (1) Low Mid High Product Revenue $ 2,117 $ 2,174 $ 2,232 Q-Q 34% 38% 42% Other Revenue $ 34 $ 36 $ 38 Total Revenue $ 2,150 $ 2,210 $ 2,270 Q-Q 34% 38% 41% Non-GAAP Gross Margin 49.0% 49.5% 50.0% Non-GAAP Operating Margin 22.5% 23.0% 23.5% Interest Expense $ (95) $ (95) $ (95) Cash Taxes $ (15) $ (16) $ (17) Non-controlling Interest $ (6) $ (10) $ (14) Ave. Diluted Shares Non - GAAP EPS $ 1.05 $ 1.10 $ 1.15 Revenue range is expected to be: Auto is expected to be in a range of $790-to-$810 million; Secure Identification Solutions, is expected to be in a range of $215-to-$230 million; Secure Connected Devices is expected to in a range of $440-to-$480 million; Secure Interface & Infrastructure is expected to be in a range of $395-to-$430 million; Standard Products is expected to be in a range of $275-to-$285 million; Corporate & Other is expected to be in a range of $34-to-$38 million. Note (1): NXP has based the guidance included in this release on judgments and estimates that management believes are reasonable given its assessment of historical trends and other information reasonably available as of the date of this release. Please note: During 4Q15, results only include approximately one-month of Freescale revenue. Guidance growth rates based on absolute reported financial results. The guidance included in this release consists of predictions only, and is subject to a wide range of known and unknown risks and uncertainties, many of which are beyond NXP's control. The guidance included in this release should not be regarded as representations by NXP that the estimated results will be achieved. Actual results may vary materially from the guidance we provide today. In relation to the use of non-gaap financial information see the note regarding "Use of Non-GAAP Financial Information" elsewhere in this release. For the factors, risks and uncertainties to which judgments, estimates and forward-looking statements generally are subject see the note regarding "Forward-looking Statements. We undertake no obligation to publicly update or revise any forward-looking statements, including the guidance set forth herein, to reflect future events or circumstances. Considering the uncertain magnitude and variability of the foreign exchange consequences upon "PPA effects", "restructuring costs", "other incidental items" and any interest expense or taxes in future periods, management believes that GAAP financial measures are not available for NXP without 16 unreasonable efforts on a forward looking basis. 16

17 Quarterly Financial Reconciliation (GAAP to non-gaap) ($ in millions, unless otherwise stated) Q3 Total Revenue 1,606 1,522 1,537 GAAP Gross Profit Gross profit adjustments (187) (8) (12) Non - GAAP Gross Profit GAAP Gross Margin 38.5% 48.6% 45.8% Non-GAAP Gross Margin 50.2% 49.1% 46.6% GAAP Operating income (loss) 1, Operating income adjustments 580 (74) (79) Non - GAAP Operating income (loss) GAAP Operating Margin 63.1% 24.6% 20.2% Non-GAAP Operating Margin 27.0% 29.5% 25.3% GAAP Financial income (expense) (174) 16 (137) Financial income adjustments (118) 60 (100) Non - GAAP Financial income (expense) (56) (44) (37) GAAP Income tax benefit (provision) 148 (15) (9) Other Adjustments 167 (8) (2) Non - GAAP Cash tax (expense) (1) (19) (7) (7) GAAP Net income (loss) attributable to shareholders Net income (loss) adjustments 631 (19) (178) Non - GAAP Net income (loss) attributable to shareholders 341 (2) GAAP Diluted net income (loss) per share attributable to shareholders Non - GAAP Diluted net income (loss) per share attributable to shareholders Cash income taxes paid during the period 2. Excludes: PPA effects: ($300M); Restructuring: ($239M) ; Stock-based compensation: ($111M); Merger related costs: ($27M) Other incidentals: $1,257M; Non-cash interest expense on convertible Notes ($10M); Foreign exchange loss on debt: ($31M); Changes in fair value of warrant liability: ($1M); Other financial expense: ($76M); Results relating to equity-accounted investees: $2M; Difference between book and cash income taxes: $167M

18 Quarterly Cash Flow Overview ($M) Q Net cash provided by (used for) operating activities Net cash provided by (used for) investing activities (9,763) (76) (132) Net cash provided by (used for) financing activities 8,616 (208) 173 Effects of changes in exchange rates on cash position (2) 1 (6) Increase (decrease) in cash and cash equivalents (878) Cash and cash equivalents at beginning of the period 2,492 2, Cash and cash equivalents at end of period 1,614 2,492 1,185 Net cash provided by (used for) operating activities Net capital expenditures on property, plant and equipment (91) (74) (105) Non-GAAP free cash flow Non-GAAP free cash flow as a percentage of Revenue 11% 17% 29% 18 18

19 Quarterly Adjusted EBITDA ($M) Q Net income (loss) Reconciling items to EBITDA Financial (income) expense 174 (16) 137 (Benefit) provision for income taxes (148) 15 9 Depreciation Amortization EBITDA 1, Results of equity-accounted investees (2) (3) (3) Purchase accounting effect on inventory Restructuring Stock-based compensation Merger-related costs Other incidental items 1 (1,254) 4 (1) Adjusted EBITDA Trailing 12-month Adjusted EBITDA 1,958 1,894 1, Excluding depreciation PP&E, amortization of software related to restructuring and Other incidental items (3) (3)

20 NXP: Secure Connections for the Smarter World Drive Profitable Growth Drive Earnings Per Share Drive Cash Flow Drive Significant Value for Our Owners 20